Stocks-1 (FMS-2009)

BSNL offers its share at a premium of Rs 40, where as its par value is Rs 160. Parul Mehra invested Rs 50,000 in this stock. After one year BSNL declared a dividend of 19%. What rate of interest did Ms Mehra receive on her investment?
(A)15.2%        (B)16.2%         (C)19%            (D)19.2%

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Solution:

"Cost of each share = par value + premium"
                                  = 160+40 = 200

Number of shares purchased = 50000/200 = 250 numbers

"Dividend is calculated on face/par value"
Face value of 250 shares = 250*160 = 40000

Dividend received on Rs.40000 = 40000*19% = Rs. 7600

This 7600 return is on total investment of Rs.50000/-

So return on investment =  Rs.7600/50000 * 100 = 15.2%

Answer (A)